Question 1

Which of the following isare reasons for easy identification and control of variable manufacturing costs under the variable costing method?

Accepted Answer

A) variable and fixed costs are reported separately. 
B) variable costs can be controlled by the operating management. 
C) fixed costs, such as property insurance, are normally the responsibility of higher management not the operating management. 
D) All of the above are true.

Question 2

Match
-Required by generally accepted accounting principles.

Accepted Answer

A) Absorption costing only 
B) Variable costing only 
C) Both absorption and variable costing

Question 3

A business operated at 100% of capacity during its first month and incurred the following costs:  If 1,000 units remain unsold at the end of the month and sales total $150,000 for the month, what is the amount of the manufacturing margin that would be reported on the absorption costing income statement?

Accepted Answer

A) $50,000 
B) $54,000 
C) not reported 
D) $70,000

Question 4

Match
-Includes gross profit on the income statement.

Accepted Answer

A) Absorption costing only 
B) Variable costing only 
C) Both absorption and variable costing

Question 5

Gyro Company manufactures Products T and W and is operating at full capacity.To manufacture Product W requires three times the number of machine hours required for Product T.Market research indicates that 1,000 additional units of Product W could be sold.The contribution margin by unit of product is as follows:
  Calculate the increase or decrease in total contribution margin if 1,000 additional units of Product W are produced and sold.

Accepted Answer

The answer of Gyro Company manufactures Products T and W...

Question 6

In contribution margin analysis, the increase or decrease in unit sales price or unit cost on the number of units sold is referred to as the:

Accepted Answer

A) sales factor 
B) cost of goods sold factor 
C) quantity factor 
D) unit price or unit cost factor

Question 7

In contribution margin analysis, the unit price or unit cost factor is computed as the difference between actual quantity sold and the planned quantity sold, multiplied by the planned unit sales price or unit cost.

Accepted Answer

A) True 
 B)False

Question 8

The level of inventory of a manufactured product has increased by 7,000 units during a period.The following data are also available:  What would be the effect on income from operations if absorption costing is used rather than variable costing?

Accepted Answer

A) $42,000 decrease 
B) $42,000 increase 
C) $52,500 increase 
D) $52,500 decrease

Question 9

A business operated at 100% of capacity during its first month and incurred the following costs:  If 500 units remain unsold at the end of the month, what is the amount of inventory that would be reported on the variable costing balance sheet?

Accepted Answer

A) $41,500 
B) $36,000 
C) $42,800 
D) $38,500

Question 10

Which of the following would be included in the cost of a product manufactured according to variable costing?

Accepted Answer

A) sales commissions 
B) office supply costs 
C) interest expense 
D) direct materials

Question 11

Under absorption costing, which of the following costs would not be included in finished goods inventory?

Accepted Answer

A) hourly wages of assembly worker 
B) straight-line depreciation on factory equipment 
C) overtime wages paid to factory workers 
D) the salaries for salespeople

Question 12

Match
-Operating income is impacted by changes in inventory level.

Accepted Answer

A) Absorption costing only 
B) Variable costing only 
C) Both absorption and variable costing

Question 13

The amount of income under absorption costing will be more than the amount of income under variable costing when units manufactured:

Accepted Answer

A) exceed units sold 
B) equal units sold 
C) are less than units sold 
D) are equal to or greater than units sold

Question 14

At EOM Inc., the beginning inventory is 20,000 units.All of the units manufactured during the period and 16,000 units of the beginning inventory were sold.The beginning inventory fixed costs are $50 per unit, and variable costs are $300 per unit.Determine a whether variable costing income from operations is less than or greater than absorption costing income from operations, and b the difference in variable costing and absorption income from operations.

Accepted Answer

The answer of At EOM Inc., the beginning inventory is...

Question 15

On the variable costing income statement, the amounts representing the difference between the contribution margin and income from operations is the fixed manufacturing costs and fixed selling and administrative expenses.

Accepted Answer

A) True 
 B)False

Question 16

Variable costing is also known as direct costing.

Accepted Answer

A) True 
 B)False

Question 17

If sales totaled $800,000 for the year 80,000 units at $10.00 each and the planned sales totaled $799,500 78,000 units at $10.25 each, the effect of the unit price factor on the change in sales is:

Accepted Answer

A) $19,500 decrease 
B) $19,500 increase 
C) $20,000 decrease 
D) $20,000 increase

Question 18

Under variable costing, which of the following costs would not be included in finished goods inventory?

Accepted Answer

A) wages of machine operator 
B) steel costs for a machine tool manufacturer 
C) salary of factory supervisor 
D) electricity used by factory machinery

Question 19

The amount of income under absorption costing will be less than the amount of income under variable costing when units manufactured:

Accepted Answer

A) exceed units sold 
B) equal units sold 
C) are less than units sold 
D) are equal to or greater than units sold

Question 20

Electricity purchased to operate factory machinery would be included as part of the cost of products manufactured under the absorption costing concept.

Accepted Answer

A) True 
 B)False

Exam 5: Variable Costing for Management Analysis

Which of the following isare reasons for easy identification and control of variable manufacturing costs under the variable costing method?

Match -Required by generally accepted accounting principles.

Match -Includes gross profit on the income statement.

In contribution margin analysis, the increase or decrease in unit sales price or unit cost on the number of units sold is referred to as the:

In contribution margin analysis, the unit price or unit cost factor is computed as the difference between actual quantity sold and the planned quantity sold, multiplied by the planned unit sales price or unit cost.

The level of inventory of a manufactured product has increased by 7,000 units during a period.The following data are also available: What would be the effect on income from operations if absorption costing is used rather than variable costing?

A business operated at 100% of capacity during its first month and incurred the following costs: If 500 units remain unsold at the end of the month, what is the amount of inventory that would be reported on the variable costing balance sheet?

Which of the following would be included in the cost of a product manufactured according to variable costing?

Under absorption costing, which of the following costs would not be included in finished goods inventory?

Match -Operating income is impacted by changes in inventory level.

The amount of income under absorption costing will be more than the amount of income under variable costing when units manufactured:

On the variable costing income statement, the amounts representing the difference between the contribution margin and income from operations is the fixed manufacturing costs and fixed selling and administrative expenses.

Variable costing is also known as direct costing.

If sales totaled $800,000 for the year 80,000 units at $10.00 each and the planned sales totaled $799,500 78,000 units at $10.25 each, the effect of the unit price factor on the change in sales is:

Under variable costing, which of the following costs would not be included in finished goods inventory?

The amount of income under absorption costing will be less than the amount of income under variable costing when units manufactured:

Electricity purchased to operate factory machinery would be included as part of the cost of products manufactured under the absorption costing concept.